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Agency problems and goal conflicts

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  • Robert A. Eisenbeis

Abstract

Agency theory is used to evaluate how the European Union (EU) may deal with the resolution of goal and agency conflicts in dealing with failing financial institutions. Experience in the United States suggests that the financial and regulatory structure being put in place, which relies upon country-sponsored deposit insurance funds and home country responsibility for supervision and lender-of-last-resort functions, is not likely to be robust to the failure of a large EU institution that threatens the solvency of the deposit insurance fund or that poses systemic risk. The author concludes that the EU needs a centralized and common approach to dealing with troubled institutions.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2004-24.

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Date of creation: 2004
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Handle: RePEc:fip:fedawp:2004-24

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References

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  1. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
  2. Edward J. Kane, 1987. "Who Should Learn What From the Failure and Delayed Bailout of the ODGF?," NBER Working Papers 2260, National Bureau of Economic Research, Inc.
  3. Thomas E. Pulkkinen & Eric S. Rosengren, 1993. "Lessons from the Rhode Island banking crisis," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 3-12.
  4. Richard Dale, 2000. "Deposit Insurance in Theory and Practice," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  5. Randall S. Kroszner & Thomas Stratmann, 1996. "Interest Group Competition and the Organization of Congress:Theory And Evidence from Financial Services Political Action Committees," University of Chicago - George G. Stigler Center for Study of Economy and State 126, Chicago - Center for Study of Economy and State.
  6. Robert R. Bliss, 2003. "Bankruptcy law and large complex financial organizations: a primer," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 48-58.
  7. Robert A. Eisenbeis & Larry D. Wall, 2002. "Reforming deposit insurance and FDICIA," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 1-16.
  8. J.G. Rotte & M.P.H. de Vor, 2001. "Report on Financial Management," Research Series Supervision (discontinued) 36, Netherlands Central Bank, Directorate Supervision.
  9. Kane, Edward J, 1977. "Good Intentions and Unintended Evil: The Case against Selective Credit Allocation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 55-69, February.
  10. Edward J. Kane, 1987. "Who should learn what from the failure and delayed bailout of the ODGF?," Proceedings, Federal Reserve Bank of Chicago, pages 306-326.
  11. Edward J. Kane, 1988. "Changing incentives facing financial-services regulators," Proceedings, Federal Reserve Bank of Cleveland, pages 265-279.
  12. Hovakimian, Armen & Kane, Edward J. & Laeven, Luc, 2002. "How Country and Safety-Net Characteristics Affect Bank Risk-Shifting," CEI Working Paper Series 2002-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  13. Kane, Edward J., 2003. "What kind of multinational deposit-insurance arrangements might best enhance world welfare?," Pacific-Basin Finance Journal, Elsevier, vol. 11(4), pages 413-428, September.
  14. Dirk Schoenmaker & Sander Oosterloo, 2005. "Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities," International Finance, Wiley Blackwell, vol. 8(1), pages 1-27, 07.
  15. Prati, A. & Schinasi, G.J., 1999. "Financial Stability in European Economic and Monetary Union," Princeton Studies in International Economics 86, International Economics Section, Departement of Economics Princeton University,.
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Citations

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Cited by:
  1. Holopainen, Helena, 2007. "Integration of financial supervision," Research Discussion Papers 12/2007, Bank of Finland.
  2. Frisell, Lars & Roszbach, Kasper F. & Spagnolo, Giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," CEPR Discussion Papers 6888, C.E.P.R. Discussion Papers.
  3. Gerhardt, Maria & Lannoo, Karel, 2011. "Options for reforming deposit protection schemes in the EU," ECRI Papers 4339, Centre for European Policy Studies.
  4. Santiago Carbo-Valverde & Edward J. Kane & Francisco Rodriguez-Fernandez, 2008. "Evidence of Differences in the Effectiveness of Safety-Net Management in European Union Countries," NBER Working Papers 13782, National Bureau of Economic Research, Inc.
  5. David G. Mayes, 2009. "Optimal Structures for Financial Regulation and Supervision," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 7(2), pages 7-12, 07.

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